UPM-Kymmene Oyj, Europe’s second-biggest papermaker, will close two publication paper mills in Finland and Germany as well as some paper machines to reduce capacity.
About 1,170 jobs will be cut by the end of 2011 as the mills in Albbruck, Germany and Myllykoski, Finland are shuttered, the Helsinki-based papermaker said in a statement today. Shares of UPM climbed 7.2 percent to 9.11 euros as of 10:34 a.m. local time.
“With the planned actions we would respond to the magazine paper overcapacity challenge,” Chief Executive Officer Jussi Pesonen said in the statement. “We would ensure the efficient use of our remaining capacity. However, this plan would not solve the cost challenges of the industry.”
The move follows this year’s purchase of Myllykoski and Rhein Paper for about 900 million euros ($1.3 billion) as the industry consolidates in response to higher production costs and a shift in demand to digital publications. The paper industry is faced with “severe challenges” amid higher costs for raw materials, energy, and logistics, Pesonen said.
UPM said it will make a provision for 200 million euros of restructuring costs this quarter and sees a write-off of about 70 million euros in fixed assets. Annual savings from the integration of Myllykoski will be about 200 million euros, the papermaker said.